Simple or Complex Trust
Submitted by finance-editor on Sat, 05/10/2008 - 09:05
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I live in california, I am the successor trustee of my fathers trust. he died in 2006. The only income the trust receives is monthly rental income from a gas station. I distribute $2,000 to my sister and I keep the rest of the monthly income. the first year I filed a k-1 for my sister but did not file one for myself. This year I will file a k-1 for both of us. This is the second year I will be doing the trust tax return. A few questions I have, the first year tax return I said was a complex trust because I did not distribute all the income. In the years I do distribute all the income can I say that the trust is a simple trust? Am I able to change from year to year saying its a complex or simple trust? Also how can it be a simple trust if you need to keep some money in the trust to pay lawyer fees and expenses?
I think if the terms of the
I think if the terms of the trust do not REQUIRE you to distribute all the trust income each year, it is a complex trust. This is so even if you do distribute all the income in a particular year
A complex trust can give the trustee discretion when, how and to whom to distribute income. A simple trust does not require the filing of a tax return. All trusts with income over $600 per year MUST file a 1041. The only advantage to a Simple Trust is its $300 Exemption versus Complex Trust's $100 exemption. A complex trust can retain income and distribute capital versus these transactions are not allowed in a
Simple Trust.
Thank you
Thank you